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Oil Price Forecast – 3 Month 6 Month 5 Year Outlook

Oil Price and Gasoline Price Forecasts

As Oil prices hit $83 a barrel and Nat Gas price over $5, and gasoline prices rocketing nationwide, the threat of high energy prices to the economy and stock market are real.

Investment advisors have forecasted $200 a barrel and most are accepting that $100 will happen. Media investment celebrity (Cathy Woods) suggested oil will be much like Whale oil centuries ago — worthless.  Yet right now and for the foreseeable future, oil prices suggest oil stocks will be paying big dividends.

OPEC sees global demand growing and insiders say they’re actually reducing supply. With a cold winter ahead, restrained output, failing alternative energy solutions, and big demand add up to very high prices. Experts say this issue will be persistent and will add to the inflation problem.

Alternative energy experts trash oil, but when WTI oil prices reach above $60 a barrel, oil has big investment value. The economies in Dallas, Denver and Calgary are likely to boom. Canadian oil stocks listed below might be worth some investigation.  Oil is at the center of US and world manufacturing and production output.  Consumers have huge demand for oil-based products, from jet fuel to electronic devices.  The demand never ends.

Right now, the US government’s decision to abandon fossil fuels is looking particularly bad. As gas prices keep rising, and headed to $US5 a gallon, the cost to consumers will change their vote in 2022.

Best Oil Stocks to Buy

Which oil stocks should you buy?  Check out these best performing oil stocks of late and look for deeper details at barchart.com.

Remember 2020 when some investors had the opportunity to jump on oil last year when they were paying people to take it. They were so smart.  The price has risen ten fold for some. Other than that dip, the price has been consistently high. And with no US fracking and further oil exploration and the blocking of the Canadian pipeline, US oil companies in Calgary, Houston, Denver, and abroad are certain this year is going to be their best ever.

Oil Price Chart courtesy of MacroTrends.

Highest gasoline price in the US?  $4.11

AAA gas prices US. Screenshot courtesy of AAA.com

The US national average for gasoline hit 3.19 cents and that hurts those who commute. With lithium batteries and electronic microchips in short supply, there is little concern about EVs taking over the market anytime soon.  There are huge issues with electric charging stations (however, check out EVGO share price) too which makes the electric savior seem ludicrous for many, many years.

Oil is the fuel of this decade and prices will rise, until US frackers and new production gets going again. Without fracking, there are big oil reserves that can be developed to help keep the US energy neutral.  That means not adding to the burgeoning national debt.

Best Oil Stocks to Buy?

Barchart shows the best performers for the last 5 day.   Geopark Holdings is a south American energy producer and it was rated as a top sell stock just last month. investorsobserver.com gave it a good rating. Callon Petroleum is rocketing of late too.  In a timely action with good foresight, they just closed the acquisition of leasehold interests and related oil, gas, and infrastructure assets of Primexx Energy Partners and its affiliates. Devon Energy has been rising fast for two weeks, after its third-quarter 2021 earnings report. Seeking Alpha reports that Marathon Oil is on pace to generate $2.0 billion in free cash flow this year, which will do wonders to balance sheet health, and dividend growth. With oil prices rising even farther, it might be the best and safety oil stock to buy.

Oil ETFs

Experts believe the best time to invest in an oil ETF is in a period of rising prices. USO ETF took a big loss last spring when the price of oil dropped. It’s not necessarily a safe way to invest but as you can see, ProShares Ultra Bloomberg Crude Oil ETF has seen incredible growth.

US News offers up their best oil stocks to buy:

Okay, to whet your apetite for oil stocks to buy, let’s see what US News suggests. There are many other oil producing companies globally too that offer big upside.

  1. Exxon (XOM)
  2. Chevron (CVX)
  3. Conoco Phillips (COP)
  4. Schlumberger (SLB)
  5. Marathon Petroleum Corp. (MPC)
  6. Pioneer Natural Resources Co. (PXD)
  7. Phillips 66 (PSX)

And Yahoo’s experts chime in with their best oil stock picks:

  1. Renewable Energy Group, Inc. (NASDAQ: REGI)
  2. Exxon Mobil Corporation (NYSE: XOM)
  3. Energy Transfer LP (NYSE: ET-PD)
  4. PDC Energy, Inc. (NASDAQ: PDCE)
  5. Chevron Corporation (NYSE: CVX)
  6. ConocoPhillips (NYSE: COP)
  7. NX Resources Corporation (NYSE: CNX)
  8. Devon Energy Corporation (NYSE: DVN)
  9. Pioneer Natural Resources Company (NYSE: PXD)
  10. Renewable Energy Group, Inc. (NASDAQ: REGI)

You can check out more about these companies on InsiderMonkey.

It’s wise for longer term investors to look at Canadian oil companies in Alberta Canada. they’ve been suffering through a bad period, but it’s changing. The Biden/Obama administration has blocked Canadian oil, but if the Republicans come back into office (guaranteed), then Canadian oil will flow again. This will ease US oil and gas prices, and leave the US less vulnerable to Saudi Arabia and OPEC.

See the Canadian oil companies below.

For those looking for the best stocks to buy right now, it’s hard to overlook the oil sector.  And with OPEC scheduling a meeting on Monday next week, oil producing companies such as those listed below, will be producing profits for their shareholders.

The rising price of oil too, has provided a big boost for the economies in Dallas, Houston, Denver, Billings, Anchorage and Austin economies and the economy up in Calgary Canada. The Dallas housing market, Calgary housing market, Houston housing market, Austin housing market and Denver housing market are some of the hottest going.

Oil is going to power the US for a long time, and the world for even longer. Despite the push to alternative energy, the reality is that only oil possesses the power and utility people and business needs. With the stimulus bill from the Democrats in jeopardy, the alternative energy sector may not get the trillions it wants to develop.  Not that alternative energy is a bad thing. It’s amazing technology. However, the cost and the output have been misrepresented to a gullible public who are beginning to catch wind of the politics.

3 Month to 6 Month Outlook

Oil experts don’t know what the 3 year to 5 year outlook is right now. Most of the price forces are political, and certainly if the Republicans regain the senate in 2022 and win the 2024 election, it could bring a return to big production increases.

Please do check out stocks to avoid, the best stocks to buy, best tech stocks, and the forecast for the next 6 months.

Hot Topic for 2021/2022
Are oil prices too high? Did Biden make the right decision?
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The higher oil prices are due to:

  • reopening economy driving up demand due to commuting and manufacturing growth
  • reduced production due to the pandemic
  • shale production down in the US
  • political restrictions on fossil fuels is discouraging investment and oil rig counts
  • speculators like the supply/demand equation
  • restriction of oil imports from Canada
  • high cost of importing oil from Saudi Arabia
  • added taxes and anti-fossil fuel production legislation
Oil Price Volatility through the past decade. Screenshot courtesy of Macrotrends.

Goldman Sachs predictions of $80 a barrel prices almost came true. Very good forecasting. Now the questions is how high oil prices will rise.

Oil Price Forecast 2022 and Beyond

Breakeven price though is considered to be $50 so an $80 a barrel price will give Texas, Montana, Colorado and Alaska a sizable boost to their economies. The Austin, Dallas, Fort Worth, Houston, Denver, Billings and Irving housing markets should see significant growth.

According to EIA’s report, U.S. economic activity keeps rising after reaching multiyear lows in the second quarter of 2020. US (GDP) declined by 3.4% in 2020 from 2019 levels but will grow by 6.0% in 2021 and by 4.4% in 2022.

EIA says that more than 90% of crude oil production in the Federal Offshore Gulf of Mexico (GOM) was taken offline in late August due to Hurricane Ida. That caused GOM production to fall .03 /bpd less then the 1.5 million b/d in August.. They expect crude oil production to come back online during September to average 1.2 million b/d for the month before returning to an average of 1.7 million b/d in 4Q21. Full production is for November and December.

EIA believes oil production will increase to an average of 11.7 million b/d in 2022, driven by growth in onshore tight oil production.

World oil price forecast. Screenshot courtesy of EIA
World fuel consumption and consumption. Screenshot courtesy of EIA.

Gasoline Price Forecast

EIA expects the retail price of regular-grade gasoline in the United States will average $2.78 per
gallon (gal) during summer 2021, which is more than last summer’s average of $2.07/gal.

Gasoline prices US history timeline. Screenshot courtesy of EIA.
Gasoline prices US summer 2021. Screenshot courtesy of EIA.
household fuel expenditures. Screenshot courtesy of EIA.

And lower oil prices is fuel to a strengthening US economic outlook.

Best Oil Stocks

US News believes these oil stocks have the best outlook:

  • Exxon Mobil Corp. (XOM)
  • Chevron Corp. (CVX)
  • ConocoPhillips (COP)
  • Schlumberger (SLB)
  • Marathon Petroleum Corp. (MPC)
  • Pioneer Natural Resources Co. (PXD)
  • Phillips 66 (PSX)

Gasoline Prices Rising Quickly

The hurricane IDA was devastating and gasoline production in Louisiana still hasn’t recovered.

Gasoline Prices This Year Chart
EIA. Regional gasoline prices quarterly.

OPEC is the world’s major oil producer and they have agreed to limit production. When supply falls, prices rise. And many sources of oil are drying up (e.g. United Arab Emirates, Venezuela).

The Long Term Future:

IEA said that once US tight oil plateaus in the late 2020s and non-OPEC production falls back, the market becomes increasingly reliant on the Middle East to balance the market. There is a continued large-scale need for investment to develop a total of 670 billion bbl of new resources to 2040, mostly to make up for declines at existing fields rather than to meet the increase in demand. — from report in OGJ.com

For non-oil producing countries, relying on the middle east for oil, and a $100 barrel of oil price is worrisome. Over time, it drains significant wealth out of their countries and jumps inflation. That’s especially so for the US, Germany, France, UK, Japan, Australia, and Canada.

The last time oil prices spiked at $150, they soon crashed along with the US economy and the US housing market. And with real estate prices so high, could we see another housing crash?

Pierre Andurand, an oil-focused hedge fund manager made headlines when he said oil companies won’t invest in new production, thus suggesting a $300 a barrel oil price was “not impossible” within a few years.

Since investors believe green energy is ready for prime time, investment in oil exploration is way down, and oil refineries aren’t being built. As a result, the price of gas is likely to skyrocket in the next 5 years.

So the real story is not crude oil predictions, but rather rising gasoline prices in the US, Europe and Asia.

Adding to potential demand comes from the failure of the Kyoto Accord and the Carbon Tax regime. Once it fully fails, demand for oil will surge.

Never Say Never to Higher Prices

Could Los Angeles home prices double? Since 2012, they have doubled in price. In Toronto, home prices skyrocketed even more, and the local government had to kill the economy to suppress home prices. Canada lost jobs last month against expert predictions of +180,000 more. Constraints on US home building also could cause house price inflation too.

Housing experts: home prices won’t rise that much. They did.

Supply and demand in homes is steady, but demand for oil is much more intense during upward economic growth. With the US, Chinese, and European economies doing well, optimism high, and interest rates low, demand for oil will stay high.

What Drives Oil Prices?

Oil prices are driven by demand from industry for plastics, fuels, and also by supply constraints by producing countries. But the real determinant of prices comes from OPEC, who artificially control production to force prices up to suit their needs. OPEC cartel is a monopoly, whom President Trump warned he may file suit with the world trade organization.

The shut in of US shale oil and other reserves has kept 28 million barrels of oil out of circulation so far this year.  That reduction of supply is pushing prices up high. The expectation is that as the world resumes its economic post pandemic activities, the WTI price of oil will surpass $100 a barrel.

The oil embargo of the 1970’s showed us supply and high prices can wreak havoc on economies. Political turmoil, sabotage, war, embargos and more could take a lot of supply out of global markets at a time when global GDP is growing.

Andurand believes high oil prices won’t affect economies, but how can it not? Even though the US is going to be the world’s top producer of oil, Japan, UK, France, Germany, and other nations won’t be able to maintain their economies with growing US protectionism.

Andurand says oil prices need to rise fast to discourage consumption, otherwise a huge price shock will happen in a few years. Everyone is buying huge SUVs and trucks now. Ford stopped making cars. Consumption will rise from vehicles and from commercial products (plastics).

For President Trump and the US economy, high oil prices and gas prices may actually stimulate US GDP growth boosting US gas consumption. The US can grow its exports significantly with oil based products. That’s a big incentive once everyone realizes what an oil rich US is all about. The US is becoming one of the top oil producers and US industry will like what they can do with this new opportunity for lucrative export products.

With Trump putting sanctions on Iran, it could set off trouble. Further, if the Trump government was to come to an end, the US democrats could decide to close down shale oil production and off shore oil production, thus pushing dependence back on the middle east.

Eric Lee of Citibank forecasted $60 for oil and still clings to lower oil price forecasts (in hindsight good call!).

Goldman Sachs predicted this back on Feb 5th: The decline in excess inventories was fast-forwarded in late 2017 by stellar demand growth, high OPEC compliance, heavy maintenance as well as collapsing Venezuela production. Goldman revised their estimate from $62 to $75 and then onto $80.

How times can change fast. Here, Jeffery Curry, head of commodity research at Goldman Sachs discusses oil and business. Expert opinions are that mideast turmoil, greed, and high demand will not raise prices of gas and oil.

Do High Oil Price Rises Predict a Recession

According to a Wall Street Journal report, there is a correlation between price rises and recessions (seen in graphic below). It could be that oil price rises typically happen toward the end of a strong business cycle, which of course always ends. Did the business cycle end because of high oil prices or because all economic booms must die a natural death?

It’s at these times, especially this record length positive growth business cycle, when global economic pressure boosts demand well ahead of supply. And as we just discovered, no one wants to invest in old technology and fossil fuels. Yet, the green revolution is still a long way away.

Perhaps more people will realize how far away electrical energy is and we’ll begin to appreciate the ongoing role of fossil fuels in global economies.

Where to Invest in Oil Stocks

If this is a meteoric rise supported by US producer strength and big global demand for gasoline, it makes sense that the biggest producers will make huge profits. However, smaller oil companies might see their growth rocket even faster.

Take a good look at Canadian oil companies. Right now, pipeline problems are trapping Canadian oil from Alberta and Saskatchewan. Their stock prices may be suppressed as sellers are thinking it is a long term issue. As prices rise, the issues will be forced to resolution and the pipelines will begin to get oil flowing.  This is not advice to invest in these firms but rather an opportunity to hedge against the coming recession with a quick win with oil, if you have the funds to play with.

Here’s some oil stocks you may want to investigate. Most are listed on the TSX and have their headquarters in Calgary:

Touchstone Exploration Inc. (TSX:TXP) – $0.255
Oil & Gas Exploration and Production

BlackPearl Resources Inc. (TSX:PXX) – $1.46
Oil & Gas Exploration and Production

Zargon Oil & Gas Ltd. (TSX:ZAR) – $0.54
Oil & Gas Exploration and Production

Pengrowth Energy Corp. (TSX:PGF) – $1.05
Oil & Gas Exploration and Production

Journey Energy Inc. (TSX:JOY) – $1.99
Oil & Gas Exploration and Production

Bonavista Energy Corp. (TSX:BNP) – $1.61
Oil & Gas Exploration and Production

BNK Petroleum Inc. (TSX:BKX) – $0.65
Oil & Gas Exploration and Production

Crew Energy Inc. (TSX:CR) – $2.75
Oil & Gas Exploration and Production

Screen Capture courtesy of web.tmxmoney.com

Obsidian Energy (TSX OBE) $1.45

Baytex Energy (TSX BTE) $5.89

Tourmaline Oil (TSX TOU) $23.41

Whitecap Resources (TSX:  WCP) $9.16

Suncor Energy Inc. (TSX:SU) $50.92

Cenovus Energy Inc. (TSX:CVE) $13.99

Encana Corp. (TSX:ECA) $16.90

If you’re firmly opposed to fossil fuels, then investing in residential solar power might be a good play.  Rising electricity rates and growing demand from electric vehicles are powering up this tech sector. With big storage batteries arriving, electricity is launching a lot of entrepreneurialism. In fact, solar power is creating more jobs than any other industry.

Solar panels prices are jumping due to tariffs on China, however that’s spawning US solar panel producers. Check them all out at energysage.com.  Their stocks prices are up 6% to 9% on the news that California is now mandating them on new homes being built.

It will be fascinating to watch the rising momentum of oil prices and gas prices and how accurate experts predictions are.

Don’t forget to bookmark this page as I’ll be continuously updating this very important topic.

 

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